Good afternoon. My name is Audrey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2024 Hawaiian Electric Industries Inc. Earnings Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Mateo Garcia, Director of Investor Relations. Please go ahead. Thank you.

Welcome everyone to HEI's third quarter 2024 earnings call. Joining me today are Scott Seu, HEI President and CEO; Scott DeGhetto, HEI Executive Vice President, CFO, and Treasurer; Shelee Kimura, Hawaiian Electric President and CEO; Ann Teranishi, American Savings Bank President and CEO; and other members of senior management. Our earnings release and our presentation for this call are available in the Investor Relations section of our website. As a reminder, forward-looking statements will be made on today's call. Factors that could cause actual results to differ materially from expectations can be found in our presentation, our SEC filings, and in the Investor Relations section of our website. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitions to the closest GAAP financial measure. Now Scott Seu will begin with his remarks.

Welcome, everyone. For today's call, I will start with key updates regarding the Maui wildfires and the definitive settlement agreement signed earlier this week. I will then touch on updates at the utility, bank, and Pacific Current, before turning it over to Scott DeGhetto, who will walk through our third quarter financial results in more detail and discuss the financial implications of recent announcements. We announced that HEI, Hawaiian Electric, and other defendants entered into a definitive settlement agreement with plaintiffs in the Maui wildfire tort litigation. Finalizing the terms of this agreement is another important milestone in our effort to offer those who suffered loss an accelerated path to recovery and regain the financial strength of our enterprise. We are pleased to sign this final agreement just three months after reaching the initial term sheet agreement we discussed last quarter. We remain confident that this settlement represents the best outcome for our community and our company. We are moving forward with a clearer line of sight toward resolution of the wildfire-related tort litigation and increased certainty for our company's path ahead. Under the terms of the settlement agreement, HEI and Hawaiian Electric will contribute a total of $1.99 billion pretax, which includes the $75 million we previously contributed to the One Ohana initiative. We expect to pay the settlement amount in four equal annual installments, with the first payment expected to be made in late 2025. The settlement agreement is conditioned on a resolution of the claims of the insurance companies that have paid claims for property loss and other damages, with no additional payments from defendants. Over the last few months, important progress has been made toward resolving the insurance claims. On August 19, the Second Circuit Court on Maui, which is overseeing the Maui wildfire tort litigation, issued an order requiring insurers to seek recovery according to Hawaii law, which requires them to assert liens against their policyholders' recoveries if their policyholders settle. The Second Circuit Court subsequently requested the Hawaii Supreme Court to weigh in on the order, and on September 25, the Hawaii Supreme Court agreed to review the circuit court's questions. Opening briefs in the state supreme court proceeding were filed earlier this week, on November 4, and reply briefs are due December 16, after which the Hawaii Supreme Court is expected to rule. We are hopeful that the supreme court will issue a ruling in favor of the individual plaintiffs, which would likely resolve the outstanding issue with insurers and bring us one step closer towards finalizing the settlement. Many of the steps required to eventually receive judicial approval are happening concurrently with the Supreme Court process seeking resolution of the insurer claims. The defendants and the class plaintiffs agreed to dismiss the consolidated class action case in federal court so that it could be refiled in state court and the class settlement could be effectuated in state court. The final settlement agreement will become final after judicial review and approval is received and other conditions laid out in the settlement agreement are met. Scott DeGhetto will discuss the accounting implications of our current expectations regarding the settlement agreement timeline and financing plan. Turning to operational updates, over the past year, we have shared the immediate action plans the utility has prioritized to address wildfire risks in the near term. These plans included the implementation of a public safety power shutoff program or PSPS, improving situational awareness through the use of advanced technologies, implementing enhanced operational strategies and practices, and hardening the grid to increase resilience. The utility has rapidly advanced each of these priorities throughout 2024. We noted that the utility had officially launched its public safety power shutoff program or PSPS on July 1. The high degree of coordination and communication required for the program to be successful has already been put to the test twice, when we activated PSPS watches in September and October. The utility carefully monitored weather conditions throughout the activations. Fortunately, it was not necessary to shut off power to customers. I am pleased that the utility was able to effectively coordinate with public agencies, first responders, customers, and others through the PSPS watches. Our utility will continue to work closely with key stakeholders to refine and enhance this new program to continuously make it more targeted and effective. The implementation of advanced technologies to improve situational awareness continues, and the utility has now deployed fifty-five new weather stations and installed thirty-nine AI-enhanced video cameras across its service territory. Grid hardening work is also progressing, and the utility continues to make investments to upgrade poles, install covered conductors, and strategically underground lines. Crews have inspected over thirty-seven thousand poles since the fall of 2023 across the highest risk circuits and have replaced approximately twenty-two hundred poles. Technologies such as sparkless fuses, new lightning arresters, and smart reclosers are also being implemented, in addition to executing increased vegetation management and hazard tree removal efforts. Importantly, investments to harden the grid increase resilience for various environmental risks that we face in Hawaii, including hurricanes, floods, tsunamis, and wildfires. The utility will be filing a new and comprehensive wildfire mitigation plan within the next few months, by January of 2025. Turning now to the bank, the bank's core operations and earnings remain strong as it continues to serve as a trusted financial partner to customers across Hawaii. In the third quarter, ASB continued to perform well, generating strong net income and profitability while continuing the net interest margin expansion we have seen throughout 2024. Following last year's strategic balance sheet repositioning, ASB has continued replacing higher-cost sources of financing with cheaper sources of financing, and ASB's balance sheet is currently well positioned. Economic indicators in Hawaii remain healthy, and the bank is seeing strong credit quality across its loan portfolio. The bank's loyal and long-tenure deposit base remains stable, and as of September 30, eighty-three percent of deposits were FDIC insured or fully collateralized. Lastly, I will give a brief update on Pacific Current before turning the call over to Scott DeGhetto. As we have discussed over the past year, HEI has been advancing a strategy designed to support a strong, financially healthy enterprise that will empower a thriving future for Hawaii. Consistent with this approach, HEI has been undertaking a comprehensive review of strategic options for Pacific Current. There is no set timetable for the review, and there can be no assurances that any actions regarding Pacific Current will result from our evaluation. In connection with this ongoing evaluation, we reported a non-cash asset impairment charge for Pacific Current, which Scott DeGhetto will discuss. In summary, our operations remain strong across our companies, and with a signed settlement agreement now in place, we are continuing to build on our significant progress to clarify HEI's path forward. As we look ahead, we will continue to take prudent and measured actions to ensure our companies are well positioned to serve our customers and community for the long term. With that, I will now turn the call over to Scott DeGhetto.

Thank you, Scott. I will start with our results for the quarter on slide six. For the second quarter, we recorded a consolidated net loss of $104.4 million or $0.91 per share. The quarter's results included two significant one-time losses. First, at the utility, we recorded an additional $203 million pretax loss for the accrual of estimated wildfire liabilities from tort-related claims. You will recall in the second quarter of this year, we accrued $1.71 billion for estimated wildfire liabilities. The $1.71 billion accrual was our best estimate as of June 30, 2024, of an equivalent lump sum amount of the four annual installments stipulated in the settlement agreement in principle. HEI now expects to make four annual payments of $478.8 million totaling $1.92 billion, which is the $1.99 billion total agreed to in the settlement less the $75 million already contributed under the One Ohana initiative. Our revised expectations resulted in the additional $203 million recorded in the third quarter. Second, we also recorded a $35.2 million pretax asset impairment at Pacific Current in connection with the ongoing review of strategic options that Scott mentioned. Approximately $40 million of the $203 million settlement accrual made at the utility is expected to be offset with insurance proceeds. There were also $16.7 million of pretax wildfire-related expenses net of $8.6 million in deferrals recorded at the utility in the third quarter, as well as $9.6 million in accrued insurance receivables in addition to the $40 million mentioned. Excluding the impacts of these items, utility core net income was $43.7 million in the third quarter compared to $53.8 million in the same quarter of last year. Lower utility core net income was driven by higher O&M. Bank wildfire-related pretax expenses were $900,000, and excluding the after-tax impact of these expenses, Bancorp net income was $19.4 million for the quarter compared to $17.6 million in the same quarter last year. Bancorp net income increased due to a lower provision for credit losses and higher non-interest income. The Pacific Current asset impairment was recorded at the holding company, which also recorded $4.7 million of pretax wildfire-related expenses net of $2.5 million of insurance recoveries. Excluding these items, the holding company core net loss was $10.9 million compared to $9.9 million in the same quarter last year, primarily due to higher holding company expenses. Excluding enterprise-wide wildfire expenses, net of insurance recoveries, and excluding the Pacific Current asset impairment, HEI's core net income for the third quarter was $52.2 million compared to $61.5 million in the same quarter of last year. Turning to our liquidity on slide seven, as of the end of the third quarter, the holding company and the utility had approximately $678 million and $148 million of cash on hand, respectively. Holding company cash includes proceeds from our recent equity issuance. As previously announced, in September, we successfully closed on an offering of newly issued shares of common stock, resulting in approximately $558 million in net proceeds. We intend to use the proceeds from our equity offering to fund our first settlement payment and for general corporate purposes. During the quarter, we also put in place an aftermarket equity issuance program that allows us to issue up to $250 million of common stock at our discretion. We have not yet issued any equity under the ATM program, but it provides an additional source of liquidity and flexibility. Last month, the utility received final approval from the Public Utilities Commission for their accounts receivable-backed credit facility. The $250 million facility had previously been approved to use for short-term financing needs, and this final approval allows the utility to use up to $100 million of the facility for long-term financing needs at any given time. Lastly, I am pleased to report that we have resolved the going concern issue disclosed last quarter. As Scott mentioned, under the final settlement agreement signed earlier this week, we will make four payments of $479 million to resolve the Maui Wildfire Tort litigation. The first payment of approximately $479 million is anticipated to be made in late 2025 and is classified as a current liability. The remaining payments expected to be made over the next several years are classified as long-term liabilities. Following the September common stock offering and other actions taken to address liquidity, sufficient cash is available to fund this current liability portion, and we have concluded that the conditions that led to the substantial doubt regarding HEI's ability to continue as a going concern have been addressed. With that, let us open up the call to questions.

Thank you. We will now begin the question and answer session. To raise your hand and join the queue, if you would like to withdraw your questions, simply press star one again. We will go first to Michael Lonegan at Evercore ISI.

Hi. Thanks for taking my questions. So you announced the strategic review of Pacific Current. Obviously, it is a smaller scale asset. You know, no mention of the bank strategic review. I am just wondering if it is fair to say that is ongoing. And then, you know, also, would you be able to share the carrying cost of Pacific Current or the core earnings of it this quarter?

Hi, Mike. This is Scott Seu. Yeah. I will confirm that we are still going through the strategic review for both the bank and, of course, now with Pacific Current. Let me pitch it over to Scott DeGhetto in terms of addressing the other part of your question.

Mike, could you just repeat the question in terms of what you are looking for on Pacific Current?

Yeah. So the carrying cost on your balance sheet or the core earnings that it delivered this quarter?

Yeah. So we are not going to, you know, as we have said previously, Mike, when it comes to, you know, the review processes that we run for these assets, just like we have said in the past for ASB, same comment for Pacific Current. You know, we are not going to, you know, comment any further until such time as, you know, we have made and the board has made a determination that we feel it is relevant to continue to talk about it.

Got it. Thanks. And then secondly for me, the opening briefs were filed with the Supreme Court. We are wondering how you are feeling about the prospects that the settlements could be resolved, you know, through negotiation between the subrogating insurers and plaintiffs. You know, obviously, if the supreme court rules against the insurance companies, it could set a bad precedent for them nationwide.

Yeah. Mike, you know, it is always possible subrogation plaintiffs could come to some sort of an agreement and a negotiated agreement. That would obviously be an acceleration of the process perhaps, but we are not directly a part of any of these. I can say on that.

Got it. Thank you. And then you highlighted that you expect to pay the settlement in four installments. But the definitive settlement stipulates you can accelerate the payment. Is that something you are considering? Is there a scenario where you pay the settlement, you know, all upfront, or are you committed to the four-year time frame?

Yeah. Right now, we anticipate paying the settlement over the four-installment period, Mike. We do have that option embedded in the settlement agreement where if we decide to prepay, we have that ability at any given time, and there is a discount rate embedded in that settlement agreement, it is 5.5%. So again, that option is always available to us if we want to use it in the future.

Thanks. And then lastly for me, so on the PBR framework, you know, if I recall correctly, it became effective in 2021. So you are coming up on the fourth year of the five-year framework. So my understanding is the commission is going to conduct a review process in 2025 to review the framework just, you know, that that was part of the establishment of it to evaluate, you know, its course of action, you know, before its last year in 2026. Just wondering, you know, in light of the wildfire, you know, developments, you know, all the developments since, what are your thoughts heading into, you know, a review of that framework? You know, what you see as risks or opportunities and, you know, what kind of steps you would be taking to prepare.

Yeah. Hi, Mike. Let me ask Joe Viola of the utility. Joe is our senior vice president. He oversees regulatory affairs. If Joe can comment on the response.

Sure. And in fact, the PBR comprehensive review is going on right now. So we have been meeting with the stakeholders in that group, meeting with the commission staff to chart out the issues that we want to review. The commission will give all the parties, including Hawaiian Electric, an opportunity to make suggestions on how the framework should be modified if that is it all going forward. So that process that the commission has set out is a multiyear process. The next multiyear rate plan is would be scheduled to begin on January 1 of 2027. So everything that has happened during the five years of the first multiyear rate plan, including the Maui wildfires and all of that, will be considered in designing what the next multiyear rate plan should look like.

Great. Thanks for taking my questions.

Thanks, Mike.

And as a reminder, to ask a question, please press star one on your telephone keypad. We will go next to Jonathan Reeder at Wells Fargo.

Hey. How is it going, team?

Jonathan. Just a couple quick questions. I know you are limited in what you can say on the other side, but were any of the terms of the definitive settlement agreement, you know, that was signed earlier this week, materially different than the agreement in principle's terms? No. No. They were consistent.

Okay. And then I think you said in terms of the core utility income, that the decrease was due to higher O&M. Was that the case? And, you know, saw it was, like, a pretty substantial ten million dollar decrease.

Yeah. Jonathan, let me ask Paul Ito, Hawaiian Electric CFO, to comment.

Hey, Jonathan. Yeah. There were higher O&M. Some of them were one-time items. Some of them were things like wildfire mitigation that we have been accelerating, for example, inspections. But in the quarter, we did record a settlement administrative fee as part of the accrual for the quarter. We also, as soon as we know, costs related to the state settlement of indemnification claim. And then we also saw higher insurance premiums for property and general liability. So those are the main items that resulted in higher O&M for the quarter.

Okay. And so the one-time item, the administrative fees, stuff like that. Like, roughly how much versus, yes, I could be maybe a little more ongoing.

Yeah. The after-tax, so the settlement administration fee after tax is $2.6 million. The state indemnification claims is about the same amount, $2.6 million. And those would be the ones that we, yeah, more one-time in nature.

Okay. Okay. That is helpful. Okay. Thanks. See you guys next week at the E I.

Thank you. Yes. See you in a few days.

And that concludes our Q&A session. I will now turn the conference back over to Scott Seu for closing remarks.

Yeah. In closing, I just wanted to highlight again how we feel we have made substantial progress in the quarter. I am very proud of the fact that we were able to reach the final settlement agreement in a fairly quick time frame after the August term sheet agreement. I am also very pleased that we are able to resolve the going concern issue that we disclosed last quarter. And above all, I think I just want to thank our shareholders, many of whom are our neighbors here in Hawaii, for your continued investment in HEI. I also want to thank those shareholders that supported our successful equity issuance in September. We really appreciate your support, and we continue to help our communities move forward to a sustainable future. So with that, thank you, everybody.

And that concludes today's conference call. Thank you for your participation. You may now disconnect.